Hoi Chong Transport, Ltd., operates a fleet of delivery trucks in Singapore. The company has determined that if a truck is driven 105,000 kilometers during a year, the average operating cost is 11.4 cents per kilometer. If a truck is driven only 70,000 kilometers during a year, the average operating cost increases to 13.4 cents per kilometer.(The Singapore dollar is the currency used in Singapore.) Requirement 1:
Using the high-low method, estimate the variable and fixed cost elements of the annual cost of the truck operation. (Round the variable cost per kilometer to 3 decimal places. Omit the "$" sign in your response.)
Variable cost per kilometer $
Fixed cost per year $
Requirement 2:
Express the variable and fixed costs in the form Y = a + bX. (Round the variable cost per kilometer to 3 decimal places. Omit the "$" sign in your response.)
Y = $ + $ X
Requirement 3:
If a truck were driven 80,000 kilometers during a year, what total cost would you expect to be incurred? (Omit the "$" sign in your response.)
Total annual cost $
Work done so far:
HIGH :11.4 * 105,000 = 1,197,000
LOW: 13.4 * 70,000 = 938,000
Total Variable cost = 105,000 * 7.4 = 777,000
Fixed cost = 1,197,000 - 777,000 = 420,000

1. $0.074 km

2. Total cost = $4,200 + 0.074x

3. $10,120

Explanation:

The computation of the fixed cost and the variable cost per hour using high and low method is seen below

Variable cost per hour = (High operating cost - Low operating cost) ÷ (High driven in kilometers - Low driven in kilometers),

Where,

High operating cost = 105,000 km × 11.4%

= $11,970

Low operating cost = 70,000 km × 13.4%

= $9,380

Hence,

= ($11,970 - $9,380) ÷ (105,000 km - 70,000 km)

= $2,590 ÷ 35,000 km

= $0.074 per km

Now, the fixed cost equal to

= High operating cost - (High driven in kilometers × Variable cost per km)

= $11,970 - (105,000 km × $0.074 )

= $11,970 - $7,770

= $4,200

2. The equation is as seen below;

Y = a + bx

Therefore,

Total cost = $4,200 + 0.074x

3. Y = a + bx

= $4,200 + 0.074 × 80,000

= $4,200 + $5,920

= $10,120

both are integral parts of a corporate balance sheet. the cash flow statement, or statement of cash flows, measures the sources of a company's cash and its uses of cash over a specific time period. the income statement measures a company's financial performance, such as revenues, expenses, profits or losses over a specific time period (in fact, it's sometimes called a statement of financial performance).

a cash flow statement shows exactly how much money a company has received and how much it has spent, traditionally over a period of one month. it captures the current operating results and changes on the balance sheet, such as increases or decreases in accounts receivable or accounts payable, and does not include noncash accounting items such as depreciation and amortization. the cash flow generally comes from revenue received as a result of business activity, but it may be augmented by funds available as a result of credit. a cash flow statement is used to determine the short-term viability and liquidity of a company, specifically how well it is positioned to pay its bills and vendors.